Political agreement reached on the first EU-level certification framework for carbon removals

In the early morning of 20 February 2024, the European Parliament and the Council reached a provisional political agreement on the Carbon Removal Certification Framework (CRCF). 

This initiative being pursued by the Commission seeks to build a statutory framework around projects taking place within the EU that generate carbon credits. Under the framework methodologies, pursuant to which the carbon credits are generated, will be developed, monitoring and verification activities will be regulated and a registry to hold the units generated will be established. There are also rules on how the units can be used. It is hoped that by providing a regulatory framework private sector actors will have greater confidence in the integrity of the carbon credits generated under the framework, thus stimulating the development and investment in the removal activities, which will be necessary as part of achieving net zero goals. 

The compromise text is not yet available. However, according to the Council press release, the key parts of the agreement include the following: 

1. Certifiable activities: The CRCF will focus on removal activities and seeks to define different categories of activity that are considered to amount to an effective removal. In accordance with the proposal from the Council, the scope of the regulation was extended to include soil emission reductions, and those that take place in a marine environment. The regulation now differentiates between the following carbon removal activities and four corresponding types of units:

• permanent carbon removal (storing atmospheric or biogenic carbon for several centuries);
• temporary carbon storage in long-lasting products (such as wood-based construction) with a duration of at least 35 years and that can be monitored on-site during the entire period; 
• temporary carbon storage from carbon farming (e.g. restoring forests and soil, wetland management, seagrass meadows);
• soil emission reduction (from carbon farming) which includes carbon and nitrous oxide reductions from soil management and, as long as such activities result in an improvement in the soil carbon balance, wetland management, no-till and cover crop practices combined with reduced use of fertilizer, etc.

Removals falling within the last two categories must be effective for at least five years to be certifiable and must not lead to land being acquired for speculative purposes negatively affecting rural communities.
Activities that do not result in the removal of carbon from the atmosphere, are not eligible for certification. The co-legislators also agreed to exclude carbon capture projects that incorporated enhanced hydrocarbon recovery from those that can generated units.  Projects will need to take place within the EU to be eligible albeit that further consideration during the legislative process is to be given to carbon capture and storage projects that utilize storage in third countries. 

2. Certification criteria: The four criteria suggested by the Commission (Quantification, Additionality, Long-term storage, and Sustainability (QU.A.L.ITY)) have been maintained. The Commission will develop tailored technical certification methodologies for different types of carbon removal and soil emission reduction activities, based on these criteria. The compromise text defines more precisely the basis on which the methodologies must be developed and includes a list of indications as to which activities should be prioritised.

3. Use of units: The co-legislators decided that the certified units can only be used within the EU policy framework for the EU’s climate objectives and will be taken into account in relation to the EU’s nationally determined contribution (NDC). They must not contribute to third countries’ NDCs and international compliance schemes. This means that there will be no corresponding adjustment allowing units to be purchased and used to meet non-EU countries obligations. Whether the units can be used against EU ETS obligations remains to be seen.

4. Monitoring and liability: The negotiators agreed to distinguish between the activity period and the monitoring period (which always covers at least the activity period) and clarified that operators will be liable to address any cases of reversal (i.e., the release of CO₂ back into the atmosphere - for example, if a forest disappears as a result of a wildfire) stemming from a carbon removal activity during the monitoring period. How project developers will cover these contingent liabilities remains to be seen. In other voluntary schemes risk is shared amongst all developers through buffer pools. Here, a specific insurance policy may need to be developed to manage this exposure. 

5. EU registry: The Commission must establish an electronic EU-wide registry four years after the regulation comes into force. The agreed text includes rules on the financing of the EU registry from annual fixed user fees.

The provisional agreement now needs to be endorsed by the member states’ representatives in the Council (Coreper) and the Parliament’s environment committee. Once approved, the text will then need to be formally adopted by both co-legislators before it can be published in the Official Journal of the EU and enter into force.